Consumer demand holding strong

Front-month ethanol futures rallied nearly 45 cents per gallon since the market low was set Nov. 6. The previous pressure in most commodity markets, based on lackluster commercial and investment buying interest, has given way to an active rally in both ethanol and energy futures markets.

Traders are now focusing on the unusual sustainability in gasoline and ethanol demand through the fall months. This could lead to overall demand growth over the holidays and break the traditional seasonal demand patterns which seem to govern the markets. At a time when stock markets are moving to levels not seen before and traders are looking for fresh and opportunistic avenues, energy markets are ripe for the picking just before the holidays.

It is uncertain if ethanol futures will be able to hold the strong front month premium, as traders in the market scramble to secure short-term supplies. But the aggressive nature in reformulated blendstock for oxygenate blending (RBOB) gasoline markets has given traders a great deal of confidence going into the holiday season. December RBOB gasoline futures rallied over 20 cents since five-month lows were set in early November.

This re-established longer-term support levels at $2.55 per gallon and quickly encouraged additional buyer interest from both investment and commercial buyers. Demand for gasoline will likely remain firm through the holidays, as traders appear to be now eyeing potential moves through the upcoming year.